Managerial Accounting -Wendy's

937 Words Mar 4th, 2013 4 Pages
Pam Powers
MBA 516

Case Study: Wendy’s Chili: A costing Conundrum

Dave Thomas was a man with a vision. He began his career in Columbus, Ohio in 1969 when he purchased a Kentucky Fried Chicken (KFC) franchise that was unprofitable. Dave turned that franchise into a profitable business and sold it back to KFC at a substantial profit. Dave had also co-founded Arthur Treacher’s Fish & Chips and was very familiar with the quick-service industry. However, hamburgers were Dave’s favorite food and he could not get a decent hamburger in town without waiting 30 minutes and so the idea of Wendy’s became a reality.

Dave had a vision for Wendy’s; to provide consumers with bigger and better hamburgers that were cooked to order, served
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Time spent on purchasing. g. Less production area. h. Less equipment needed.

Some disadvantages of a limited menu are: a. Losing the competitive edge. b. Losing the market share of sales from the customers that want chicken or fish. c. Not being able to meet the needs of different target markets.

The concept was eventually discontinued due the response of competitive pressures and changing customer demands.

3) Success from Wendy’s drive-thru windows was a combination of several things. I believe that the uniformity of the building, the advertising strategy and the location which was usually located in urban or densely populated suburban areas. I also think that the limited number of menu items helped facilitate orders being given out faster.

4) I calculated that it costs $1.06 to make an eight-ounce bowl of chili using the full-cost basis.

Out of pocket cost was figured at $1.10 per eight-ounce serving.

5) A bowl of chili costs $1.06 using the full cost method of using direct costs.

6) Based on just the direct cost I would drop the chili.

However, so many factors are not shown which could impact profitability. In the winter when chili sales are high do people come for a hot bowl of chili and buy and hamburger? Chili is one of Wendy’s core products and by dropping it would it cause them to lose customers who purchase chili and other items?

Another item to consider is the price of

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